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Does competition for (human) capital discipline governments? The role of commitment

Author

Listed:
  • Roc Armenter
  • Francesc Ortega

    (Department of Economics Universitat Pompeu Fabra)

Abstract

We argue that labor mobility does not lead to a ''race to the bottom,'' where countries drastically cut redistributive transfers in order to attract skilled workers. The basis of our argument is that these cuts are not credible policies. We propose a two country model where competition for mobile factors is limited to credible policies. Both countries end up with positive redistribution, and the country with a technological advantage can sustain more redistribution. The model can address the interaction of redistribution and migration policies. In particular, we show that when countries have similar skill endowments but different technologies, migration policies enabling unskilled labor mobility lead to higher global welfare than policies enabling skilled labor mobility

Suggested Citation

  • Roc Armenter & Francesc Ortega, 2006. "Does competition for (human) capital discipline governments? The role of commitment," 2006 Meeting Papers 547, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:547
    as

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    More about this item

    Keywords

    taxation; factor mobility; commitment;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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